By  on February 15, 2014

President Obama came to California Friday to take stock of the state’s worst drought in more than 100 years, which has consumers taking a more cautious take and denim manufacturers looking harder at ways to conserve water.

The president unveiled more than $160 million in federal aid, including $60 million for food banks to help families hurt financially by the drought (mainly farm workers in some of the state’s poorest towns), $10 million for conservation assistance and watershed protection and $3 million in emergency grants for rural communities with water shortages.

When Gov. Jerry Brown declared a statewide drought emergency in the nation’s most populous state on Jan. 17, many wondered if the proverbial well was running dry. Last year brought only 7.48 inches of rain to California, the lowest amount in 119 years of record keeping. Rural towns in California’s Central Valley, center of the state’s $45 billion agriculture sector, are due to run out in a few months’ time and will require water to be trucked in. Southern California, home to the nation’s largest apparel-manufacturing base, has enough water in storage to stave off any mandatory cutbacks for a year and a half. Water rates remain unchanged and there hasn’t been rationing, although Brown suggested residents reduce usage by 20 percent.

“The weather in general is a temporary factor,” said Ken Goldstein, an economist with The Conference Board. “Without more rain, it will keep consumers cooped up longer, and raise fears later in the season for devastating fires. The longer [a drought] stretches on into fire season it will limit their spending, especially if they are afraid whatever they buy will be burned.”

But Goldstein said overall there’s an improving trend in the economy due to the uptick in housing and labor markets. “The real key is the middle consumer, those who used their credit cards to shop in December and who aren’t shopping now. As we get closer to Easter and Passover, they will be hitting the malls.”

Eduardo Martinez, senior economist at Moody’s Analytics, said, “For consumers the drought is an indirect factor, mainly on food prices. It will lead to crop shortages and farmers letting land lay fallow, meaning yields are less. If the situation is the same by summer, costs will be higher, though that can also change quickly. People with lower incomes will be impacted, and companies won’t be as quick to increase their wages to match [the higher food prices.]”

The drought’s effect on retail is uncertain, but Chris Christopher, director of consumer economics for IHS Global Insight, suggested it could cut into people’s disposable income by pushing water and electricity bills higher, leaving less money for consumers to spend elsewhere. “After you see a huge bill, you step back a bit and you try to take it relatively easy. It is going to have some impact in California in some way or another on the discretionary spend,” he said.

Raj Rajagopalan, a professor at the USC Marshall School of Business, agreed that the drought could impinge upon discretionary spending and pointed to Las Vegas, where multitiered water pricing was introduced in a past drought, as an example of what could happen in California. “In Las Vegas, they reduced water usage and today it is about one-third of what it was 10 years ago. People do reduce consumption of water, which is good, but, to some extent, their bills go up and they reduce their consumption of other things,” he said. “Similarly, when gas prices go up, people worry about spending on other things. I think it is an important issue to keep in mind.”

When it comes to the manufacturing side of the apparel business, Rajagopalan said that the impact of the drought may be minimal because so much apparel production has moved offshore and, relative to manufacturers in some industries, apparel manufacturers aren’t heavy water users. He did mention, however, that raw material prices for apparel companies could rise as manufacturers and suppliers that serve the apparel industry and are heavy water users pass costs onto their customers. Furthermore, the issue of elevated water prices could cascade throughout the economy as companies decide to locate or move outside the state to avoid high costs in California.

“The only caveat I add to all this is that we really don’t know. We may have a downpour next month, and this all becomes mute, but, absent that, this is valid,” said Rajagopalan.

Well before this year’s drought, several of the Golden State’s denim brands had been installing environmentally friendly machines that use laser and ozone gas in an effort to conserve water. The trend started about five years ago when sustainable fashion was a buzzword. Levi’s, AG Adriano Goldschmied, Big Star and Citizens of Humanity have been using the new technology to lighten, disinfect and even etch elaborate designs on jeans.

While initially costly — a machine that uses ozone to lighten denim can cost up to $100,000 — the savings can be worth it. When South Gate, Calif.-based Koos Manufacturing, which owns AG Adriano Goldschmied and Big Star, turned on its first ozone generator five years ago, it expected to reduce its consumption of water, chemicals and dirty energy by about 25 percent annually.

Ozone acts like a bleach to disinfect garments, kill bacteria and clean up the indigo that has bled onto white pocket linings. Laundering with ozone requires the gas to be pumped from an ozone generator into a tumbler. Less water is used, bleach is minimized and energy consumption is reduced.

Koos has used some form of laser technology since 2010. By stripping the denim with a laser beam, it can create whiskers, floral prints and other finishes without the use of harsh chemicals and water. Nearly all of Big Star’s spring styles were treated with lasers.

For Earnest Sewn’s relaunch this fall, its L.A. laundry is employing ozone, laser and recycled water on at least 40 percent of its collection. “As we began using the ozone and laser, we fell in love with the results and what those results meant to the environment,” said Vincent Flumiani, creative director of New York-based Earnest Sewn. “All that said, we are very excited about this and can assure you it will be a part of our DNA moving forward.”

Michael Glasser, owner of Rich and Skinny denim, has devised wash techniques that use just one gallon of water. In fact, he planned to launch a sustainable denim line with Gwen Stefani last year called DWP, the acronym for Department of Water and Power. However, they refocused the line on nondenim products and kept the name, saying that it also stands for “design with purpose.”

In San Francisco, Levi’s has one machine each for laser and ozone in its state-of-the-art factory called Eureka. Opened last April, Eureka is a laboratory where the company tests new techniques, such as reducing water use, before implementing them worldwide in its other factories. Some alternatives to water-intensive techniques are hand-sanding and dying with foam. The company also added care tags to its jeans that encouraged consumers to use cold water for washing and air dry. During the week of Feb. 10, it sent daily missives to employees about the company’s efforts to conserve water during the drought and tips for employees to do so as well.

Levi’s also launched an initiative titled Water
With these eco-friendly campaigns, “The consumer is getting to find that is the new normal and that is the way business should be conducted,” said Jonathan Cheung, head of design for the Levi’s brand.

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